Tuesday, August 11, 2009
5:59:56 PM EDT

A Trio of Stops

by
James Brown

FLR suffered a sharp, post-earnings sell-off that pushed shares through support at $55.00. Volume was heavy on the decline. I suspect FLR might over correct so I'm moving our trigger to buy calls back down to $51.00, which is closer to the rising trendline of higher lows. If triggered at $51.00 our first target is $54.80. Our second target is $59.00. This could take several weeks.

I suggest readers use the September or October calls.

Picked on July xx at $ xx.xx

Euro Currency ETF - FXE - close: 141.42 chg: +0.09 stop: 139.95

The oversold bounce in the dollar might be running out of steam. The FXE produced a very mild rebound off the $141.00 level and its 50-dma. I am not suggesting new bullish positions at this time.

Our first target is $144.50. Our second target is $148.50. The P&F chart is bullish with a $168 target.

I have been growing more concerned about the action in the GDX. Gold is not showing any strength and there was no follow through higher when the GDX broke through its inverse H&S pattern. More conservative traders may want to exit early or maybe raise their stop loss toward the $37.50 level. I am not suggesting new positions at this time.
GDX has already exceeded our first target. Our second target is $44.00.

IDXX is not moving much. There is no follow through on the rally but neither is there any profit taking. I still think that if the market's pull back starts to pick up steam IDXX will correct.
Currently we have two strategies for IDXX.

Aggressive strategy: Entry point at $51.10. Stop loss at $48.99. Our first target is $54.85. We do not want to open new aggressive positions at this time. I suggested very small positions sizes (about 1/4 of your normal trading size).

Original plan is to buy calls at $47.50 with a stop at $44.95. If triggered at $47.50 our first target is $52.00. Our second target is $54.90. Our time frame is six to eight weeks once triggered.

We have two days left for this JCP play. The company reports earnings on August 14th before the opening bell. That means we'll plan to exit on Thursday at the closing bell. While the $30.00 mark is clear support I'm upping our stop loss to $30.95, which is still under the rising 10-dma. I am not suggesting new bullish positions at this time.
JCP has exceeded our first target. Our second and final target to exit is $34.90.
This was an aggressive trade using half our normal position size.

The financial sector was one of the worst performers today thanks to Richard Bove, an influential analyst. He basically said investors should sell the banking stocks as earnings will not improve for the rest of the year. This helped push the banking indices to 4%-5% declines. Shares of LM fell in their wake and lost 3.7%. I'm sticking with our plan to buy a dip. Our trigger is $25.55.
If triggered our first target is $29.75. Our second target is $33.40. My time frame is six to eight weeks. FYI: The P&F chart is bullish with a $39 target.

Picked on July xx at $ xx.xx

Lorillard Inc. - LO - close: 73.97 change: +0.48 stop: 69.45

LO displayed some relative strength with a rally toward resistance near $75.00 but shares trimmed their gains by the close. We are still waiting for a dip near $70.00 with a trigger to buy calls at $70.50. Our first target is $74.50. Our second target is $77.00. The Point & Figure chart is bullish with a $92.00 target.

Picked on August xx at $ xx.xx

Polaris - PII - close: 37.98 change: -0.93 stop: 31.95

The rally in PII is starting to falter. Nimble and aggressive traders could try bearish positions in an attempt to scalp a few points on the way down. We're waiting for a correction. The plan is to buy calls at $34.15.
Our first target is $37.50. Our second target is $39.90. FYI: The Point & Figure chart is bullish with a $43.50 target.

Note: More aggressive traders could buy puts right here with a stop loss just above $40.00 and exit in the $35 region.

Picked on July xx at $ xx.xx

PUT Play Updates

Genzyme - GENZ - close: 49.36 change: -1.18 stop: 52.55

There was no follow through on GENZ's pop yesterday. The stock's bounce failed at its 10-dma. Even a BTK biotech index that closed in positive territory was not enough to help the rebound in GENZ. Readers can use the recent action as a new entry point to buy puts.

In the press release yesterday GENZ issued a lot of bad news about charges the company will have to take, starting from scratch on some of their drugs in the Boston plant, and that the company would earn less money than expected. This removed some uncertainty about the company's situation, which probably sparked the bounce. Unfortunately for shareholders the trend is still down.
Our first target to take profits is $45.25. Our second target is $41.00. The P&F chart is bearish with a $40 target.

The BTK biotech index managed to eke out a gain but the IBB saw its intraday bounce fade. I am not suggesting new bearish positions at this time. Currently our exit target is $75.10.
More aggressive traders may want to aim for the $74-73 area.

IBM is slowly drifting lower. It's not too late to buy puts although I would prefer to open positions in the $118.00-120.00 zone. I am adjusting our stop loss to $120.10.
Our first target to take profits is at $113.75, which is just above the top of the gap from mid July. Our second and final target is $111.25, which is near the bottom of the gap.

FYI: If IBM does fill the gap it may turn into a bullish candidate.

Picked on August 08 at $118.17 /gap down entry
/originally listed at $119.33
Change since picked: - 0.38
Earnings Date 10/08/09 (unconfirmed)
Average Daily Volume = 7.9 million
Listed on August 08, 2009

Today looks like another failed rally for ICE, this time at the 30-dma. It's also edging closer to breakdown under round-number support at $90.00. Our plan is to buy the second half of our position when ICE hits $89.85. ICE can be a very volatile stock so we should consider this an aggressive trade. Our target to exit is $83.75. More aggressive traders can aim lower.

Picked on August 08 at $ 93.60 Buy Half Now
Change since picked: - 3.30
Picked on August xx at $ xx.xx

Marvel Entertainment - MVL - close: 38.43 change: -0.24 stop: 40.01

MVL is drifting lower and inching closer to a breakdown under support near $38.00. I am suggesting a trigger to buy puts at $37.90. If triggered our target is $34.10 as the $34.00 level could be support. I'm listing a stop loss at $40.01 but more conservative traders might be able to use a tighter stop at $39.55 or just above $39.00. Nimble traders may want to try and launch put positions on a failed rally in the $39.50-40.00 zone.

Picked on August xx at $ xx.xx

QQQ ProShares - QLD - close: 44.20 change: -0.81 stop: 46.10 *new*

It's taken several days but the QLD has finally turned negative for us. Shares are starting to breakdown from their trading range. I am lowering the stop loss down to 46.10.
Our target is $40.50.

Picked on July 30 at $ 44.89
Change since picked: - 0.69
Earnings Date 00/00/00
Average Daily Volume = 13.5 million
Listed on July 30, 2009

Shanda Interactive - SNDA - close: 49.39 chg: -0.57 stop: 51.25

The Chinese stock market has continued to show strength so SNDA is getting a little help at home. However, the stock appears to have produced a new failed rally today. I would use this as a new entry point to buy puts.

An alternative entry point would be to wait for a new decline under $48.00 to launch bearish positions.

SNDA is a volatile stock so readers may want to use smaller position sizes. Shares should see support near $45.00 and again at $40.00. I am targeting a drop into the $41.50-40.00 zone.

(What is a strangle? It's when a trader buys an out-of-the-money (OTM) call and an OTM put on the same stock. The strategy is neutral. You do not care what direction the stock moves as long as the move is big enough to make your investment profitable.)

McDonald's - MCD - close: 56.02 change: -0.25 stop: n/a

There was no follow through on MCD's Monday morning pop. I suspect it may have been a one-day move.
I am not suggesting new strangle positions at this time.

I suggested the August $60 calls (MCD-HL) and the August $55 puts (MCD-TK). Our estimated cost is $1.25 (0.70 + 0.55). We want to sell if either option hits $2.50 or higher.